10-Q - TOFB - Equibles

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-Q

☒	Quarterly<br> report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended April 1, 2023
☐	Transition<br> report pursuant to Section 13 or 15(d) of the Exchange Act for the transition period from ☐ to ☐
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Commission

file number: 1-9009

TofuttiBrands Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	13-3094658
(State<br> of Incorporation)	(I.R.S.<br> Employer Identification No.)

50Jackson Drive, Cranford, New Jersey 07016

(Address of Principal Executive Offices)

(908)272-2400

(Registrant’s Telephone Number, including area code)

Securities

registered pursuant to Section 12(g) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common<br> Stock, par value $0.01 per share	TOFB	None

N/A

(Former

Name, Former Address and Former Fiscal Year,

if

Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large<br> accelerated filer ☐	Accelerated<br> filer ☐
Non-accelerated<br> filer ☒
Smaller<br> reporting company ☒	Emerging<br> growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐ No ☒

As

of May 16, 2023 the Registrant had 5,153,706 shares of Common Stock, par value $0.01, outstanding.

TOFUTTI

BRANDS INC.

INDEX

		Page
Part I - Financial Information:
Item<br> 1.	Unaudited Condensed Financial Statements
	Unaudited Condensed Balance Sheets – April 1, 2023 and December 31, 2022	3
	Unaudited Condensed Statements of Operations - Thirteen Weeks ended April 1, 2023 and April 2, 2022	4
	Unaudited Condensed Statements of Changes in Stockholders’ Equity - Thirteen Weeks ended April 1, 2023 and April 2, 2022	5
	Unaudited Condensed Statements of Cash Flows - Thirteen Weeks ended April 1, 2023 and April 2, 2022	6
	Notes to Unaudited Condensed Financial Statements	7
Item<br> 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item<br> 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item<br> 4.	Controls and Procedures	15
Part II - Other Information:
Item<br> 1.	Legal Proceedings	16
Item<br> 1A.	Risk Factors	16
Item<br> 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item<br> 3.	Defaults Upon Senior Securities	16
Item<br> 4.	Mine Safety Disclosures	16
Item<br> 5.	Other Information	16
Item<br> 6.	Exhibits	16
Signatures		17

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PART

I - FINANCIAL INFORMATION

Item1. Financial Statements

TOFUTTI

BRANDS INC.

Unaudited

Condensed Balance Sheets

(inthousands, except share and per share figures)

		December 31,2022
Assets
Current assets:
Cash	418	$	1,072
Accounts receivable, net of allowance for doubtful accounts and sales promotions was 495 for<br> both periods	940		1,305
Inventories	2,587		2,463
Prepaid expenses and other current assets	66		80
Total current assets	4,011		4,920
Operating lease right-of-use assets	140		158
Financing lease right-of-use assets	49		53
Deferred tax assets	357		367
Other assets	19		19
Total assets	4,576	$	5,517
Liabilities and Stockholders’ Equity
Current liabilities:
Income taxes payable	41	$	41
Accounts payable	65		684
Accrued expenses	336		555
Financing lease liabilities, current	15		15
Total current liabilities	457		1,295
Financing lease liabilities, long-term	36		39
Operating lease liabilities	67		85
Total liabilities	560		1,419
Stockholders’ equity:
Preferred stock - par value .01 per share; authorized 100,000 shares, none issued and outstanding	-		-
Common stock - par value .01 per share; authorized 15,000,000 shares, issued and outstanding 5,153,706 shares	52		52
Additional paid in capital	283		263
Retained earnings	3,681		3,783
Total stockholders’ equity	4,016		4,098
Total liabilities and stockholders’ equity	4,576	$	5,517

All values are in US Dollars.

See

accompanying notes to unaudited condensed financial statements.

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TOFUTTI

BRANDS, INC.

Unaudited

Condensed Statements of Operations

(inthousands, except per share figures)

	Thirteen weeks			Thirteen weeks
	ended			ended
	April 1, 2023			April 2, 2022
Net sales	$	2,490		$	3,463
Cost of sales		1,884			2,606
Gross profit		606			857
Operating expenses:
Selling and warehouse		271			264
Marketing		95			156
Research and development		28			40
General and administrative		302			337
Total operating expenses		696			797
Income from operations		(90	)		60
SBA loan forgiveness		-			165
Income before interest expense and income taxes		(90	)		225
Interest expense		1			-
(Loss) income before income tax		(91	)		225
Provision for income taxes		11			20
Net (loss) income	$	(102	)	$	205
Weighted average common shares outstanding
Basic		5,154			5,154
Diluted		5,154			5,154
(Loss) earnings per share:
Basic	$	(0.02	)	$	0.04
Diluted	$	(0.02	)	$	0.04

See

accompanying notes to unaudited condensed financial statements.

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TOFUTTI

BRANDS, INC.

Unaudited

Condensed Statements of Changes in Stockholders’ Equity

(inthousands)

	Common Stock		Additional Paid-in Capital		Retained Earnings			Total
	Thirteen weeks ended April 1, 2023
	Common Stock		Additional Paid-in Capital		Retained Earnings			Total
December 31, 2022	$	52	$	263	$	3,783		$	4,098
Stock-based compensation		—		20		—			20
Net loss		—		—		(102	)		(102	)
April 1, 2023	$	52	$	283	$	3,681		$	4,016
	Common Stock		Additional Paid-in Capital		Retained Earnings		Total
---	---	---	---	---	---	---	---	---
	Thirteen weeks ended April 2, 2022
	Common Stock		Additional Paid-in Capital		Retained Earnings		Total
January 1, 2022	$	52	$	207	$	4,308	$	4,567
Net income		—		—		205		205
Net income (loss)		—		—		205		205
April 2, 2022	$	52	$	207	$	4,513	$	4,772

See

accompanying notes to unaudited condensed financial statements.

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TOFUTTI

BRANDS INC.

Unaudited

Condensed Statements of Cash Flows

(inthousands)

	Thirteen weeks<br><br> ended<br> April 1, 2023			Thirteen weeks<br><br> ended<br> April 2, 2022
Cash used in operating activities, net	$	(650	)	$	(109	)
Cash used in financing activities, net		(4	)		—
Net (decrease) increase in cash		(654	)		(109	)
Cash at beginning of period		1,072			1,698
Cash at end of period	$	418		$	1,589
Supplemental cash flow information:
Interest paid	$	1			—

See

accompanying notes to unaudited condensed financial statements.

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TOFUTTI

BRANDS INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (In thousands, except for share and per share data)

Note1: Basis of Presentation

The accompanying unaudited condensed financial information, in the opinion of management, reflects all adjustments (which include only normally recurring adjustments) necessary to present fairly the Company’s financial position, operating results and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for the thirteen-week period ended April 1, 2023 are not necessarily indicative of the results to be expected for the full year or any other period.

The Company’s fiscal year is either a fifty-two or fifty-three-week period which ends on the Saturday closest to December 31^st^.

Note2: Recently Issued Accounting Standards

The Company considers the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s balance sheets or statements of operations.

On January 1, 2023, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaces the previously established credit losses framework with a new accounting standard that requires management to measure an allowance for expected credit losses that is based on a broader range of reasonable and supportable information for lifetime credit loss estimates.

Note3: Inventories

Inventories consist of the following:

Schedule of Inventories

	April 1, 2023		December 31, 2022
Finished products	$	1,748	$	1,387
Raw materials and packaging		839		1,076
Inventories,<br> net	$	2,587	$	2,463

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TOFUTTI

BRANDS INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (In thousands, except for share and per share data)

Note4: Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes.

The Company recognized an income tax expense of $11 and an income tax expense of $20 for the thirteen week periods ended April 1, 2023 and April 2, 2022, respectively. The Company recorded a valuation allowance of $24 for the thirteen week period ended April 1, 2023.

Note5: Earnings (Loss) Per Share

Basic earnings per common share (“EPS”) applicable to common stockholders is computed by dividing earnings applicable to common stockholders by the weighted-average number of common shares outstanding. If there is a loss from operations, diluted EPS is computed in the same manner as basic EPS is computed.

The following table sets forth the computation of basic and diluted earnings per share:

Schedule of Earnings Per Share, Basic and Diluted

	Thirteen<br> <br>weeks ended<br> <br>April 1, 2023			Thirteen<br> <br>weeks ended<br> <br>April 2, 2022
Net income (loss), numerator, basic computation	$	(102	)	$	205
Net income (loss), numerator, diluted computation	$	(102	)	$	205
Weighted average shares - denominator basic computation		5,154			5,154
Weighted average shares, as adjusted - denominator diluted computation		5,154			5,154
Earnings (loss) per common share - basic	$	(0.02	)	$	0.04
Earnings (loss) per common share - diluted	$	(0.02	)	$	0.04

The following are securities excluded from weighted-average shares used to calculate diluted earnings (loss) per common share, as the result of including them to calculate diluted EPS is anti-dilutive:

Schedule of Weighted Average Numbers of Shares

	Thirteen weeks<br> <br>Ended<br> <br>April 1, 2023		Thirteen weeks<br> <br>Ended<br> <br>April 2, 2022
Shares subject to outstanding common stock options		250,000		—

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TOFUTTI

BRANDS INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (In thousands, except for share and per share data)

Note6: Share Based Compensation

On June 10, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan provides for grants of various types of awards that are designed to attract and retain highly qualified personnel who will contribute to the success of the Company and to provide incentives to participants in the 2014 Plan that are linked directly to increases in shareholder value which will therefore inure to the benefit of all shareholders of the Company. Such grants can be, but are not limited to, options, stock appreciation rights, restricted stock, performance grants, stock bonuses, and any other type of award that is consistent with the purposes of the 2014 Plan. Employees and officers of the Company are eligible to receive incentive stock options while corporate directors are only eligible to receive non-qualified options.

The

2014 Plan made 250,000 shares of common stock available for awards. The 2014 Plan also permits performance-based 2014 awards paid under it to be tax deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, as “performance-based compensation.” 250,000 and 0 stock options were issued in 2022 and 2021, respectively, and 250,000 non-qualified options were outstanding as of December 31, 2022. The exercise price of all options granted in 2022 is $0.95 per share, the market price at the close of business on the date of the grant. 83,333 of the options vested at the respective grant date, 83,333 will vest in December 2023, and 83,334 will vest in December 2024. In the event of a sale of the Company at any time prior to December 22, 2024, all remaining unvested options shall vest immediately. All options expire on December 21, 2027.

The following is a summary of stock option activity from December 31, 2022 to April 1, 2023:

Schedule of Stock Option Activity

	NON-QUALIFIED OPTIONS
	Shares		Weighted Average Exercise Price ()
Outstanding at December 31, 2022		250,000
Granted		—
Exercised		—
Outstanding at April 1, 2023		250,000
Exercisable at April 1, 2023		83,333

All values are in US Dollars.

The following table summarizes information about stock options outstanding at April 1, 2023:

Schedule of Information About Stock Options

Range of Exercise Prices ()		Weighted Average Remaining Life<br> <br>(in years)		Weighted Average Exercise Price()	Number<br> <br>Exercisable
0.95	250,000		4.75			83,333

All values are in US Dollars.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula. Expected volatilities and risk-free interest rates are based upon the expected life of the grant. The interest rates used are the U.S. Treasury yield curve in effect at the time of the grant.

During fiscal year ended December 31, 2022, 250,000 options were granted, with 83,333 of the options vesting at the respective grant date, 83,333 vesting in December 2023, and 83,334 vesting in December 2024. At the date of grant, expected volatility was 82.65%, a risk-free rate of 3.79%, 0% expected dividends, and an expected term of five years.

As of April 1, 2023, the intrinsic value of the options outstanding and exercisable options was $35 and $12, respectively, and there was $85 of total unrecognized compensation cost. Total stock-based compensation for the thirteen weeks ended April 1, 2023 was $20, which is recorded in general and administrative expenses on the statement of operations.

250,000

options will expire on December 22, 2027 if not exercised by that date.

Note7: Note Payable

SmallBusiness Administration (SBA) Loan

On

May 2, 2020, the Company received from the SBA a loan of $165 from the Paycheck Protection Program at an interest rate of 1%. Interest and payments were deferred until March 4, 2021. The current portion of the loan was $165 as of January 2, 2021 and the loan was scheduled to expire on May 2, 2022. On January 12, 2022, the Company was informed by the SBA that the entire amount of the loan had been forgiven free of taxation. The Company recorded forgiveness of debt income of $165 in the thirty-nine weeks ended October 1, 2022 as SBA loan forgiveness on the unaudited condensed statement of operations.

Note8: Revenue

Performance obligations relating to the delivery of food products are satisfied when the goods are shipped to the customer and net of all applicable discounts, as follows: Payment term discounts, off-invoice allowance, manufacturer chargeback, freight allowance, spoilage discounts, and product returns.

Revenues by geographical region are as follows:

Schedule of Disaggregation Revenue

	Thirteen<br> <br>weeks ended<br> <br>April 1, 2023		Thirteen<br> <br>weeks ended<br> <br>April 2, 2022
Revenues by geography:
Americas	$	2,421	$	3,285
Europe		4		-
Asia Pacific and Africa		57		-
Middle East		8		178
Revenues	$	2,490	$	3,463

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TOFUTTI

BRANDS INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (In thousands, except for share and per share data)

Approximately 90% of the Americas’ revenue in the thirteen week period in 2023 and 94% in the thirteen week period in 2022 is attributable to sales in the United States. All of the Company’s assets are located in the United States.

Net sales by major product category:

	Thirteen<br> <br>weeks ended<br> <br>April 1, 2023		Thirteen<br> <br>weeks ended<br> <br>April 2, 2022
Frozen desserts and foods	$	390	$	547
Cheeses		2,100		2,916
Revenues	$	2,490	$	3,463

Note9: Leases

The

Company’s facilities are located in a one-story facility in Cranford, New Jersey. The 6,200 square foot facility houses its administrative offices, a warehouse, walk-in freezer and refrigerator, and a product development laboratory and test kitchen. The Company’s original lease agreement expired on July 1, 1999, but it continues to occupy the premises on a monthly basis. Any changes by either the landlord or the Company remains subject to a six-month notification period. The Company currently has no plans to enter into a long-term lease agreement for the facility. Rent expense was $23 and $20 for the thirteen weeks ended April 1, 2023 and April 2, 2022, respectively. The Company’s management believes that the Cranford facility will continue to satisfy its space requirements for the foreseeable future and that if necessary, such space can be replaced without a significant impact to the business. The Company rents warehouse storage space at various outside facilities. Outside warehouse expenses were $75 for the thirteen weeks ended April 1, 2023 and $95 for the thirteen weeks ended April 2, 2022. The Company rents copiers under finance leases. The Company currently has one copier under a finance lease with a start date of June 1, 2022. Payments for copiers amounted to $4 and $0 for the thirteen weeks ended April 1, 2023 and April 2, 2022, respectively.

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease. The current portion of lease liabilities is included in accrued expenses on the condensed balance sheets.

Under Topic 842, finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method. The Company has a finance lease consisting of a copier lease with a term of four years. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease.

The

Company’s lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. At the time of adoption of Topic 842, the Company used the incremental borrowing rate of 5.5% for all leases that commenced prior to that date.

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TOFUTTI

BRANDS INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (In thousands, except for share and per share data)

ROU lease assets and lease liabilities for our operating leases were recorded in the balance sheet as follows:

Schedule

of ROU Lease Assets and Liabilities for Operating Leases

	As of			As of
	April 1, 2023			December 31, 2022
Operating lease right-of-use assets	$	140		$	158
Current portion of lease liabilities		73			74
Operating lease liabilities, net of current portion		67			85
Total lease liability	$	140		$	159
Weighted average remaining lease term (in years)		1.8			2.1
Weighted average discount rate		5.5	%		5.5	%

ROU lease asset and lease liability for our finance lease were recorded in the balance sheet as follows:

Schedule of ROU Lease Assets and Liabilities for Finance Leases

	As of			As of
	April 1, 2023			December 31, 2022
Finance lease right-of-use asset	$	49		$	53
Current portion of lease liabilities		15			15
Operating lease liabilities, net of current portion		36			39
Total lease liabilities	$	51		$	54
Weighted average remaining lease term (in years)		3.2			3.4
Weighted average discount rate		6.5	%		6.5	%

Future lease payments included in the measurement of lease liabilities on the balance sheet as of April 1, 2023 are as follows:

Schedule of Future Lease Payments

	Operating lease liabilities			Finance lease liability			Total
2023 (remainder of year)	$	60		$	13		$	73
2024		81			18			99
2025		7			18			25
2026		-			7			7
Total future minimum lease payments		148			56			204
Present value adjustment		(8	)		(5	)		(13	)
Total	$	140		$	51		$	191

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TOFUTTI

BRANDS INC.

Item2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Thefollowing is management’s discussion and analysis of certain significant factors which have affected our financial position andoperating results during the periods included in the accompanying financial statements.

The discussion and analysis which follows in this Quarterly Report and in other reports and documents and in oral statements made on our behalf by our management and others may contain trend analysis and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to future events and financial results. These include statements regarding our earnings, projected growth and forecasts, and similar matters which are not historical facts. We remind stockholders that forward-looking statements are merely predictions and therefore are inherently subject to uncertainties and other factors which could cause the actual future events or results to differ materially from those described in the forward-looking statements. These uncertainties and other factors include, among other things, business conditions in the food industry and general economic conditions, both domestic and international; lower than expected customer orders; competitive factors; changes in product mix or distribution channels; and resource constraints encountered in developing new products. The forward-looking statements contained in this Quarterly Report and made elsewhere by or on our behalf should be considered in light of these factors.

CriticalAccounting Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The policies discussed below are considered by management to be critical to an understanding of our financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

RevenueRecognition. We primarily sell plant-based, vegan, dairy-free soy-based cheeses and frozen desserts. We recognize revenue when control over the products transfers to our customers, deemed to be the performance obligation, which generally occurs when the product is shipped or picked up from one of our distribution locations by the customer. We account for product shipping, handling and insurance as fulfillment activities with revenues for these activities recorded within net revenue and costs recorded within cost of sales. Revenues are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. We base these estimates of expected amounts principally on historical utilization and redemption rates. Estimates that affect revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized.

Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one year or shorter duration. As such, we do not capitalize contract inception costs and we capitalize product fulfillment costs in accordance with U.S. GAAP and our inventory policies. We generally do not have any unbilled receivables at the end of a period.

AccountsReceivable. The majority of our accounts receivables are due from distributors (domestic and international) and retailers. Credit is extended based on evaluation of a customers’ financial condition and, generally, collateral is not required. Accounts receivable are most often due within 30 to 90 days and are stated at amounts due from customers net of an allowance for doubtful accounts and reserve for sales promotions. Accounts outstanding longer than the contractual payment terms are considered past due. We make estimates of expected credit and collectability trends for the allowance for credit losses based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current and future economic conditions that may affect the Company’s expectation of the collectability in determining the allowance for credit losses.

*Inventory.*Inventory is stated at lower of cost or net realizable value determined by first in first out (FIFO) method. Inventories in excess of future demand are written down and charged to the provision for inventories. At the point of which loss is recognized, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in the newly established cost basis.

IncomeTaxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded if there is uncertainty as to the realization of deferred tax assets. We will recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.

RecentAccounting Pronouncements

Our company considers the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our balance sheets or statements of operations.

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Resultsof Operations

Thirteen Weeks Ended April 1, 2023 Compared with Thirteen Weeks Ended April 2, 2022

Net sales for the thirteen weeks ended April 1, 2023 decreased to $2,490,000, or 28%, from net sales of $3,463,000 for the thirteen weeks ended April 2, 2022. Sales of our vegan cheese products decreased to $2,100,000 in the thirteen weeks ended April 1, 2023 from $2,916,000 in the thirteen weeks ended April 2, 2022, due to the timing of cheese promotions that occurred this year versus last year. Sales of our frozen dessert and frozen food products, which consist primarily of frozen dessert products, decreased to $390,000 for the thirteen weeks ended April 1, 2023 from $547,000 for the thirteen weeks ended April 2, 2022. Sales of frozen dessert products were negatively impacted by a reduction in sales of our pint products.

Our gross profit decreased significantly to $606,000 for the thirteen weeks ended April 1, 2023 from $857,000 for the thirteen weeks ended April 2, 2022, due primarily to the timing of promotions being moved to a different fiscal period. Our gross profit percentage was 24% for the thirteen weeks ending April 1, 2023 compared to 25% for the thirteen weeks ended April 2, 2022.

Freight expense, a significant part of our cost of sales, decreased by $106,000, or 33%, for the thirteen weeks ended April 1, 2023 compared with $212,000, or 9%, for the thirteen weeks April 2, 2022. Freight expense was 9% of sales for both the thirteen weeks ended April 1, 2023 and April 2, 2022.

Selling expenses increased by $7,000, or 3%, to $271,000 for the thirteen weeks ended April 1, 2023 from $264,000 for the thirteen weeks ended April 2, 2022. The increase was due to increases in meetings and convention expense of $44,000 and sample shipping costs of $7,000, which were partially offset by decreases in commission expense of $21,000, outside warehouse rental expense of $15,000, and a decrease in bad debt expense of $15,000. The decrease in commission expense was caused by the decrease in sales, while the increase in meetings and convention expense was due to the sponsoring of food shows in 2023 that were not attended in the comparable 2022 period.

Marketing expenses decreased by $61,000, or 39%, to $95,000 for the thirteen weeks ended April 1, 2023 from $156,000 for the thirteen weeks ended April 2, 2022. The decrease was primarily due to decreases in advertising expense of $16,000, artwork and plate expense of $13,000, and promotion expense of $49,000, which were partially offset by an increase in point of sale materials expense of $13,000. The decrease in promotion expense is a reflection of the decrease in sales. We anticipate that our marketing expenses will continue at a lower level as compared to those for the 2022 period.

Product development costs, which consist principally of salary expenses and laboratory costs, decreased slightly by $12,000, or 27%, to $27,000 for the thirteen weeks ended April 1, 2023 from $40,000 for the thirteen weeks ended April 2, 2022, due to a $12,000 decrease in laboratory supplies. We anticipate our product development costs for the balance of the year will continue at a similar level as those for the 2022 period.

General and administrative expenses decreased by $35,000, or 10%, to $302,000 for the thirteen weeks ended April 1, 2023 from $337,000 for the thirteen weeks ended April 2, 2022, primarily due to decreases in professional fees and outside services expense of $15,000, public relations expense of $28,000 and IT expense of $7,000, which were partially offset by an increase in non-cash compensation expense of $20,000. We anticipate that our general and administrative expenses will continue at a slightly lower level than those for the 2022 period.

Income tax expense was $11,000 for the thirteen weeks ended April 1, 2023 and $20,000 for the thirteen weeks ended April 2, 2022. The income tax expense resulted from the reduction in the deferred tax asset balance during the thirteen weeks ended April 1, 2023 compared to the thirteen weeks ended April 2, 2022.

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Liquidityand Capital Resources

As of April 1, 2023, we had approximately $418,000 in cash and our working capital was approximately $3,554,000, compared with approximately $1,072,000 in cash and working capital of $3,625,000 at December 31, 2022. The decrease in cash is primarily due to decreases in accounts payable and accrued expenses.

The following table summarizes our cash flows for the periods presented:

	Thirteen<br> <br>Weeks ended<br> <br>April 1, 2023			Thirteen<br> <br>Weeks ended<br> <br>April 2, 2022
Net cash used in operating activities	$	(650	)	$	(109	)
Net cash used in financing activities		(4	)		-
Net decrease in cash and cash equivalents		(654	)		(109	)

Net cash used in operating activities for the thirteen weeks ended April 1, 2023 was $650,000 compared to $109,000 used in operating activities for the thirteen weeks ended April 2, 2022. Net cash used in operating activities for the thirteen weeks ended April 1, 2023 was primarily a result of a net loss of $102,000, an increase in inventories of $124,000, deferred taxes of $32,000, a decrease in accounts payable and accrued expenses of $838,000, and a non-cash lease expense of $3,000, offset by a decrease in accounts receivable of $365,000, a decrease in deferred taxes of $10,000, stock-based compensation of $20,000, and a decrease in prepaid expenses and other current assets of $14,000. The increase in inventories during the period is due to management’s decision to purchase certain key ingredients in advance of production needs to ensure an adequate supply and to prevent future production disruptions.

We believe our existing cash on hand at April 1, 2023, existing working capital and the cash flows expected from operations will be sufficient to support our operating and capital requirements during the next twelve months.

Inflationand Seasonality

We do not believe that our operating results have been materially affected by inflation during the preceding two years. There can be no assurance, however, that our operating results will not be affected by inflation in the future. Our business is subject to minimal seasonal variations with slightly increased sales historically in the second and third quarters of the fiscal year. We expect to continue to experience slightly higher sales in the second and third quarters, and slightly lower sales in the fourth and first quarters, as a result of reduced sales of dairy-free frozen desserts during those periods.

Off-balanceSheet Arrangements

None.

ContractualObligations

We had no material contractual obligations as of April 1, 2023.

RecentlyIssued Accounting Standards

See Note 2 to the unaudited condensed financial statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

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Item3. Quantitative and Qualitative Disclosures About Market Risk

We do not believe that our exposure to market risk related to the effect of changes in interest rates, foreign currency exchange rates, commodity prices and other market risks with regard to instruments entered into for trading or for other purposes is material.

Item4. Controls and Procedures

Evaluationof Disclosure Controls and Procedures. As of April 1, 2023, our Company’s chief executive and financial officer conducted an evaluation regarding the effectiveness of our Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive and financial officer concluded that our disclosure controls and procedures were not effective as April 1, 2023.

DisclosureControls and Internal Controls. As provided in Rule 13a-14 of the General Rules and Regulations under the Securities and Exchange Act of 1934, as amended, Disclosure Controls are defined as meaning controls and procedures that are designed with the objective of insuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, designed and reported within the time periods specified by the SEC’s rules and forms. Disclosure Controls include, within the definition under the Exchange Act, and without limitation, controls and procedures to insure that information required to be disclosed by us in our reports is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

Management’sReport on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of the interim Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.

Based on the evaluation under the frameworks described above, Mr. Kass, our chief executive and chief financial officer, has concluded that our internal control over financial reporting was ineffective as of April 1, 2023 because of the following material weaknesses in internal controls over financial reporting:

●	A<br> continuing lack of sufficient resources and an insufficient level of monitoring and oversight, which may restrict our ability to<br> gather, analyze and report information relative to the financial statements, including but not limited to accounting estimates, reserves,<br> allowances, and income tax matters, in a timely manner.
●	The<br> limited size of the accounting department makes it impracticable to achieve an optimum separation of duties and monitoring of internal<br> controls.

To date, we have been unable to remediate these weaknesses, which stem from our historically small workforce, which consisted of four persons at April 1, 2023.

Changesin Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the period covered by this report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART

II - OTHER INFORMATION

Item1. Legal Proceedings

We are not a party to any material litigation.

Item1A. Risk Factors

There have been no material changes to the Company’s “Risk Factors” set forth in its Annual Report on Form 10-K for the year ended December 31, 2022.

Item2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item3. Default Upon Senior Securities

None.

Item4. Mine Safety Disclosures

None.

Item5. Other Information

None.

Item6. Exhibits

31.1	Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline<br> XBRL Instance Document
101.SCH	Inline<br> XBRL Schema Document
101.CAL	Inline<br> XBRL Calculation Linkbase Document
101.DEF	Inline<br> XBRL Definition Linkbase Document
101.LAB	Inline<br> XBRL Labels Linkbase Document
101.PRE	Inline<br> XBRL Presentation Linkbase Document
104	Cover<br> Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TOFUTTI<br> BRANDS INC.
	(Registrant)
	/s/ Steven Kass
	Steven<br> Kass
	Chief<br> Executive Officer
	Chief<br> Accounting and Financial Officer
Date:<br> May 16, 2023

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Exhibit31.1

CERTIFICATIONPURSUANT TO

SECTION302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Steven Kass, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tofutti Brands Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:<br> May 16, 2023
/s/ Steven Kass
Steven<br> Kass
Chief<br> Executive Officer

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Steven Kass, certify that:

I have reviewed this quarterly report on Form 10-Q of Tofutti Brands Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 16, 2023
/s/ Steven Kass
Steven Kass
Chief Financial Officer

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tofutti Brands Inc. (the “Company”) on Form 10-Q for the period ending April 1, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Kass, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Steven Kass
Steven Kass
Chief Executive Officer
Date: May 16, 2023

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tofutti Brands Inc. (the “Company”) on Form 10-Q for the period ending April 1, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Kass, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Steven Kass
Steven Kass
Chief Financial Officer
Date: May 16, 2023

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.